Abstract Under the background that government levies carbon tax on carbon emission, a supply chain including two upstream firms and two downstream firms is taken for consideration, where each firm can choose competition in environmental R&D or cooperation in environmental R&D which can be further divided into horizontal cooperation, vertical cooperation and general cooperation. Then four game models are constructed respectively. With equilibriums of these models, environmental R&D level, profit, carbon emission and social welfare are compared under each model to determine the optimal choice of environmental R&D for each firm in the supply chain. It’s found that, from the view of environmental R&D level, carbon emission and social welfare, the strategy of cooperation in environmental R&D dominants the strategy of competition in environmental R&D, and general cooperation in environmental R&D is an optimal strategy for each firm in supply chain. Taking profit into account, general cooperation in environmental R&D is also an optimal strategy for the upstream firms, but horizontal cooperation and vertical cooperation in environmental R&D maybe the optimal strategy for the downstream firms.
2016, Vol. 13 
